How to control the cost of health care through price transparency

As the cost of health care continues to rise, it is crucial for consumers to better understand the actual cost of health care and the need for greater price transparency.

“After all, we practice consumerism when it comes to shopping at the grocery store, buying clothes and other products and services. We shop for sales, compare prices, brands and research online with one goal in mind — to find the lowest price and save money,” says Ron Smuch, insurance and benefits analyst at JRG Advisors.

Smart Business spoke with Smuch about how employers can encourage price transparency in their health plans.

Why isn’t the consumerism that comes so naturally in other areas of our lives used in health care?

Understanding the true price of health care can be mind-boggling. Rates and costs can fluctuate depending on your insurance plan and where services are provided. Often, as a patient, we have no idea the total amount we will pay for a test or procedure until we receive the bill from the insurance company. We rely on the assumption that we simply ‘have insurance’ with no consideration or research as to the actual cost of a procedure.

Greater price transparency allows consumers to clearly see the price of treatment and determine their out-of-pocket costs before receiving care. The importance of transparency is such that there are several provisions in the Affordable Care Act addressing the issue. Although there are requirements for health plans as to transparency and reporting, there has yet to be full implementation of the law.

How else can price transparency lower health care costs?

In addition to educating consumers, price transparency in health care can also lower costs for claims payments and common medical services. When consumers are aware of the price for tests, procedures or medications, they pay more attention to treatment options, provider options and the actual need for a given test and whether there is a more affordable option available. Ultimately, known pricing creates smart shopping. Health care cost transparency creates competition, which lowers costs.

A 2014 study published in the Journal of the American Medical Association found that allowing patients to access price information for several medical procedures before obtaining health care services could lead to lower health care costs. The study targeted medical claims paid by employers on behalf of their employees after a price transparency tool was made available to them. The costs for employees who utilized the price transparency tool were lowered by 14 percent for lab tests, 13 percent for imaging procedures and 1 percent for office visits, in comparison to employees who didn’t use the tool. The actual dollar savings for those using the transparency tool for imaging procedures equated to a per incident savings of $124.74, $3.45 for lab testing and $1.18 for office visits.

What tools are available to help promote price transparency?

Price transparency has slowly evolved through the continued popularity of health savings accounts and high-deductible health plans in an effort for consumers to lower their health care spending. A person with a high deductible is more likely to be more conscious and concerned about price, which results in their curiosity to inquire about how much things cost. This will likely force medical providers to be more transparent with their pricing.

The on-going demand and attention to price transparency in health care has resulted in the development of medical cost savings companies offering price transparency tools that allow a consumer to ‘shop’ the price for medical services in their surrounding area often by zip code and before the time of service. These tools and capabilities are useful to consumers who want to compare prices in order to make more informed decisions about their health care.

Price transparency can have a tremendous impact, educating consumers about health care costs and their understanding that more expensive doesn’t always mean better. Furthermore, transparency can lead to a more efficient health care delivery system and curb rising costs.

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